• EUR/JPY may decline further as Japanese Yen strengthens on expectations the BoJ will tighten policy in April.
• The International Monetary Fund praised Japan’s economic resilience, backing gradual stimulus withdrawal.
• ECB’s Lagarde and policymakers reiterated that policy will stay restrictive until inflation sustainably returns to the 2% target.

EUR/JPY moves little after registering modest losses in the previous trading day, hovering around 183.80 during the Asian hours on Monday. The currency cross may extend its decline as the Japanese Yen (JPY) strengthens on growing expectations that the Bank of Japan (BoJ) will tighten policy in April to counter rising inflation driven by higher energy costs.

The International Monetary Fund (IMF) has backed the BoJ’s current path of rate hikes. Following a policy consultation on Friday, the IMF praised Japan’s economic resilience and supported a gradual withdrawal of monetary stimulus, with inflation projected to converge toward the 2% target by 2027.

However, the JPY faced pressure as oil prices surged after US President Donald Trump escalated threats against Iran. Japan remains particularly vulnerable to supply disruptions due to its heavy reliance on Middle East oil imports.

Trump issued a new deadline for Iran to reopen the Strait of Hormuz while intensifying threats against its power plants and civilian infrastructure. Iranian officials warned of reciprocal retaliation, targeting US-linked infrastructure, and stated the strait would stay closed until war damages are compensated.

Meanwhile, downside in the EUR/JPY cross may be limited as the Euro (EUR) finds support from the hawkish stance of the European Central Bank (ECB). ECB President Christine Lagarde and other policymakers have reiterated that policy will remain restrictive until inflation sustainably returns to the 2% target.

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